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Financial & Managerial Accounting
Found in: Page 307

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Short Answer

Good accounting systems help with the management and control of cash and cash equivalents.

1. Define and contrast the terms liquid asset and cash equivalent.

Answer

A fluid resource is a resource that can promptly change over into cash, with least or no misfortune in esteem. Cash reciprocals are momentary responsibilities with temporarily available cash briefly accessible money.

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Step by Step Solution

Step-by-Step SolutionStep 1: Introduction of Accounting System

An accounting system is a bunch of accounting processes with incorporated methods and controls. An accounting system plans to record transactions, sum up those exchanges into a totaled structure, and make reports that chiefs can utilize to screen, break down, and further develop activities.

Step 2: Effect of transaction

A liquid asset refers to an asset that can be promptly converted over into one more sort of asset or be utilized to fulfil an obligation.

A cash equivalent is a short-term investment that can be promptly changed over to a known amount of cash and is sufficiently close to its maturity date. Its reasonable worth is somewhat insensitive toward interest rate changes.

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